Alibaba headquarters in Hangzhou, highlighting the company’s shift toward AI cloud growth amid slowing e-commerce performance (Photo: Unsplash)
Alibaba Group Holdings reported mixed results for the quarter ended April-June 2025 and accentuating both the promise and the challenges of one of China's tech giants. One of the best performing areas was its cloud division, where revenues soared past expectations up 26% to 33.4 billion yuan ($4.67 billion).
This increase illustrates the breadth of the aggressive push into artificial intelligence by the company, where it has announced a flurry of rapid upgrades and innovations. Over the past year, Alibaba poured in more than 100 billion yuan to build infrastructure and develop products related to AI. Group CEO Eddie Wu said these efforts were yielding tangible results which would put AI at the center for future growth.
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Cloud was impressive, but Alibaba's core E-commerce business fell short of expectations. For the first time, it reported a revenue stream from its restructured China E-commerce Group, which includes Taobao, TMall and its quick commerce ventures, food delivery platform Ele.me and travel agency Fliggy.
Together, these delivered a 10% growth. But with consumer demand weaker than expected, it brought down the overall revenue of the company to 247.65 billion yuan. This value is 2% short of analyst estimates. Income from operations dipped back by 3% year on year and now adjusted earnings before taxes and amortization had descended into a 14% decline owing to heavy investments in expansion of instant commerce.
Enter fast retail courtesy of Alibaba, as it aims to extend its reach to instant commerce, what with other players PDD Holdings, Meituan and JD.com competing for dominance in the field. The result of intense competition driven by subsidies has brought forth a rapid spurt in user numbers, but penetration margins have suffered across all these companies.
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Analysts noted that while Alibaba's instant farming strategy is apparently promising in broadening its consumer base, it has hurt margins. Jiang Fan, the E-commerce group's head, expected this could contribute as much as 1 trillion yuan of potential annualized gross merchandise volume within three years, with what Alibaba is counting on as a 30 trillion-yuan market opportunity.
Outside China the sales were up on international commerce by 19% and sales from Europe and the Middle East increased in influence by most demand. In addition, the company solidified its configuration over its logistics arm, Cainiao and with share buybacks from Fosun International for almost $350 million. These moves portray the much larger effort of Alibaba to offset the local challenges with global expansion.
However, competition in the home market is becoming fiercer along with profit pressures and increasing dependence therefore on the success of the AI-driven cloud business and on the ability to monetize quick commerce without dragging margins downwards to maintain value.
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